Wingstop: Expect chicken prices to remain high in 2021

Chicken wing prices will remain higher than normal this year until poultry production can catch up with the increased consumer demand for the menu item, executives from Wingstop said during the company’s second-quarter earnings call.

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(Wingstop)
(Wingstop)

Chicken wing prices will remain higher than normal this year until poultry production can catch up with the increased consumer demand for the menu item, executives from Wingstop said during the company’s second-quarter earnings call on July 28.

“Given the challenges all poultry producers continue to face with staffing, we anticipate wing prices to remain elevated for the balance of the year,” Wingstop CEO Charlie Morrison said.

“Our expectation is that cost of goods will operate at approximately 45% in the second half of the year. We anticipate restaurant margins of approximately 20% for the second half of the year, which at this level we believe represents the uniqueness of our operating model through the high productivity it generates due to our simple labor model.”

Chicken wing supply chain challenges put significant pressure on the company’s food costs and will likely result in larger and more frequent menu price increases in the second half.

Thighstop, virtual brands to drive sales

During the call, Wingstop highlighted several new initiatives the company believes will drive sales going forward, including Thighstop and plans to open additional virtual kitchens.

Thighstop is a virtual concept focused solely on chicken thighs. Adding thighs to the menu helps Wingstop save money by buying whole chickens.

“Managing the cost volatility of wings has been a focus for us for a number of years. We know that the key to unlocking a less volatile food cost for the brand is predicated on the utilization of more parts of the chicken,” Morrison explained.

The brand also announced it would be opening several new virtual kitchens this year as a part of Wingstop’s plans to expand in New York City. Wingstop plans to secure agreements with already existing ghost kitchen operators to help save on real estate costs.

“Ghost kitchens will play a key role in the build out of our footprint, and we're excited about the potential this new restaurant format can offer,” Morrison added. “We think ghost kitchens have ratios at three to four times stronger than our traditional locations.”

Quarterly financial results

The casual dining chain reported a 1.7% decline in net income to $11.3 million during the second quarter. Adjusted net income, which excluded the $2 million sale of company-owned restaurants to a franchisee last year, rose 13.1%.

Wingstop’s cost of sales grew 6% to $14.2 million during the 13-week period, accounting for 77.7% of company-owned restaurant sales compared to 73.1% in 2020. The sales gains will compensate for the increased commodity costs, the company predicted.

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